How to feel better about your financial future
Nearly one in four UK adults report that the effects of the cost-of-living crisis aren’t just felt in their wallets; their mental health and general wellbeing have also suffered. According to NerdWallet research from May 2023 (www.nerdwallet.com), 42% of us say we worry more about money now than we did a year ago and 23% say they feel anxious about their current financial situation at least once a day.
51% of people admit that their financial situation has had an impact on their mental health and 18% say that the impact has been significant.
The most important thing to remember about anxiety is that it can affect anyone, regardless of their financial situation. Even if you feel fortunate and have a good amount of wealth, you might still worry about your financial situation and as a result, you might make a rash emotional decision that seems reasonable at the time but may turn out to be bad for your long-term future. If you have investments, including paying into a pension it’s something to be especially wary of.
With inflation set to remain well above the Bank of England’s 2% target for some time, many of the triggers for financial anxiety are probably going to linger. So, what can you do if you’re feeling worried about your financial situation?
Take control of the things that you can control.
The first thing to keep in mind is that while some financial factors are outside of your control, there are still those that you can deal with. There’s only so much you can do to limit the effects of inflation on your spending and there might be little things you can do to curb your expenses such as shopping around or cutting back on non-essentials, unfortunately the rising cost of living is not something any of us can avoid.
But by putting your short, medium and long-term plans ahead of your immediate priorities you can gain more control over your financial destiny. This should help you to feel more assured overall since you’ll be more equipped to handle whatever tomorrow may bring.
When daily money problems consume your mind, it can be challenging to think long-term. But worrying about your capacity to reach more far-off, significant goals is frequently a source of financial distress. From having the means to pay for impending major events like a family wedding to putting off goals like enjoying a happy retirement.
For your current savings, investments and pension pot to truly grow in value over the long-term, they need to be earning returns higher than the rate of inflation. Otherwise, you’re affectively losing money in real terms. The time to plan for your long-term is not when everything in the short-term seems more settled and normal – it’s right now.
Planning for the long-term takes a calm mindset…
It is entirely reasonable to feel emotionally affected by market volatility. It usually makes big news when stock markets fall, but you won’t typically find much media commentary outside of the finance pages while they are rising. This can create panic and fear. After all, people usually invest a lot of money and naturally don’t like the thought of losing it.
Over the past 12 months of cost-of-living dominated media gloom, there have been moments of market volatility that have attracted attention, from the infamous Liz Truss’ mini budget last autumn to worries about US banks in early 2023. Panic has been loudly reported and in 2022 UK investors pulled money out at a record level.
But here’s the key point – the same survey of advisers found that the emotional decisions of their clients were costing them at least 2% a year in returns and 48% of advisers believe their average client has lost out on between 4-5% because of rash decisions.
It makes sense that investors would be worried by times of market volatility at a time when so many of us are already experiencing anxiety over financial problems. But although past performance is not a guide to future returns, history has regularly shown that markets recover from dips. Staying calm and patient is often the best decision you can make.
So how do you keep a calm mindset in these uncertain times?
Having a financial advisor is one way to ease your anxiety. The Embark research (www.embarkinvestments.co.uk) found that almost two in three clients (64%) agree their advisor helps them avoid emotional decision making.
This is only one of the many reasons why talking to a financial advisor could be the beginning of putting any worries you have about your financial future to rest. A financial advisor can assess your current plans and determine how effectively they are positioned to help you reach your long-term objectives. They can use their expertise to provide recommendations that are tailored to your situation, which you’d be comfortable considering.
With an advisors help you can truly find out how much risk you’d be willing to take and the potential higher returns you could achieve as a result.
Beyond those initial conversations, having a financial adviser can help you through the ups and downs of life, because if the last few years have taught us anything at all, its that things can quickly change, and you can’t predict the future.
Having strong, carefully considered plans can help you prepare better for whatever lies ahead, so if something bad happens that leaves you feeling worried, your adviser can be there to talk it through and check the impact on your plans.
If you are keen to feel more positive about your financial situation please do get in touch, speaking with an Independent Financial Adviser you trust could help you plan for a stronger financial future and go a long way to easing anxiety.
Affinity Financial Advisors Ltd, High House, Harlington Rd, Uxbridge UB8 3HX
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